The Commerce Commission is stepping up its activity against businesses that make misleading claims about their goods or services, and those that do so risk paying hefty fines for breaching the Fair Trading Act.

The Commission recently took successful cases of misleading conduct against two businesses – bicycle retailer Bike Barn and pharmaceutical company Reckitt Benckiser – that saw them being fined $800,000 and $1.08 million respectively. These are some of the largest fines imposed under the Fair Trading Act.

The Commission has recently filed charges of misleading conduct against another two businesses – hardware chain Bunnings and mobile trader Appenture Marketing. These will now be heard in the District Court.

These cases are a timely reminder that the Commission takes misleading conduct seriously. Businesses need to make sure their sales and marketing is fair, accurate and genuine, and they must substantiate any claims they make if they want to avoid being prosecuted by the Commission.

The Bike Barn and Reckitt Benckiser decisions

Bike Barn was found guilty of giving the misleading impression that it was selling bikes at a substantial discount for a limited period, when in fact the ‘discounted’ price was the usual selling price. In sentencing Bike Barn the District Court Judge pointed out that the public is entitled to be protected from misleading impressions.

Reckitt Benckiser was found guilty of misleading consumers by selling a range of different Nurofen products that claimed to target specific pain, such as migraines, menstrual pain and backache. However each product contained exactly the same quantity of the same active ingredient, which meant they all worked in exactly the same way.

The company had been told in 2011 and 2013 that it was making misleading claims about the products, but continued to do so. The District Court Judge who heard the case described this as “blatant” and “highly misleading”.

The Commerce Commission pointed out that misleading conduct is particularly significant when selling pharmaceutical or healthcare products because consumers have to rely on what they are told about them and cannot usually verify the information on the packaging.

The charges against Bunnings and Appenture Marketing

In its case against Bunnings, the Commerce Commission alleges that the company misled consumers through its widespread use of the term “lowest price guarantee”, which gives the impression that its prices are the lowest on the market when they are not.

The case against Appenture Marketing highlights the importance of providing accurate information to customers who buy goods and services using credit contracts. Appenture Marketing is a mobile trader or ‘truck shop’ that sells a range of goods on credit. The Commerce Commission alleges that the business failed to disclose key information to customers when they entered its credit contracts. It also alleges that the business misled customers about guarantees that goods would be delivered and would match their description, and about the amount they would have to pay back if goods were repossessed and sold.

Appenture Marketing is the eleventh mobile trader to be charged by the Commerce Commission in the past year. Six of them were sentenced and fined a total of $582,500 in 2016.

What do these recent cases mean for your business?

The significant fines for Bike Barn and Reckitt Benckiser, and the charges against Bunnings and Appenture Marketing, are an important reminder that your marketing and sales conduct needs to be genuine and reliable. You must substantiate any claim you make, and make sure your customers receive a fair overall impression of the goods or services you are selling them.

If you would like more information about misleading conduct, or a review of your business’s marketing and advertising strategy, please contact Hayden Wilson.